A System Dynamics Approach to Customer Churn Management in the Mobile Telecommunication Industry: The Case of Zambia

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Banda, Patience K.
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The University of Zambia
Customer churn is a major challenge in the mobile telecommunications industry today. With one customer leaving for another telecommunication service provider, perceptions about the brand change. There are high chances that a churner is not a promoter, thus they may not promote the brand well after they leave. Consequently, many more customers are potentially at the edge of leaving for another mobile telecommunications service provider. No matter how long the customer has been on a network, the mobile telecommunications service providers feel the impact when they churn. Churners can influence existing and potential customers and this may lead to declines in revenue generation and growth. The pattern of churn changes over time, arising from different factors that may be known or unknown. The complexity of these factors makes churn management challenging. This study proposes a model that uses system dynamics, a simple yet aggressive approach that gives important insights into managing customer churn in the telecommunication industry. The data used was collected through surveys and interviews from seven hundred mobile subscribers in six districts of Zambia, the three Mobile Network Operators (MNOs) and Zambia Information Communication & Telecommunications Agency (ZICTA). The model uses factors that led to customer churn between 2010 and 2015, and allows for a simulation of a forecasted customer churn rate when mobile network operators take action and when they do not. The results of the survey show that on average, MNOs on the Zambian telecommunication sector experience annual churn rates between 3.73 and 9.14 percent. The model shows that if the MNOs apply recommendations suggested in this model, annual churn rate can reduce to about 1.02 percent after twenty iterations. Churn rate has the potential to soar to about 86 percent within the same period if MNOs do not take action.
Telecommunication--Marketing. , Consumer profiling. , BUSINESS & ECONOMICS / Customer Relations. , Customer services. , Customer relations.